Foreign Investment

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In the pre-liberalization era, Foreign Direct Investments (FDIs) into India were plagued by several restrictions. This included ceilings on foreign equity, restrictions on the use of brand names, restrictions on the expansion of investments into consumer goods and several others. To add to the miseries was the Industrial Licensing System. In 1991, many of these impositions were either abandoned or significantly eased, paving the way for FDIs to boost India’s economic growth.

India was under British rule. For India to have been paranoid of domination by foreigners after independence was perhaps understandable. But why is Nepal afraid?

India wrongly equated foreign investment with foreign rule and all but banned foreigners from investing in property, businesses, and shares. And where foreign investment was allowed, it had to come in only after fulfilling onerous regulations, and then face ceaseless monitoring by bureaucrats who excelled in creating red tape.

Time proved that this approach was wrong. Foreign investment did not result in foreign takeovers. Singapore, a dot on world map, after it got rid of the same colonial masters that India had – the British – opened up its economy to foreigners. No one took it over. It just made Singaporeans rich.

No country has in the last few decades been taken over by another because of a country’s openness to investment. So why should Nepal create such a burdensome environment for foreigners bringing money in?

Foreigners are not allowed to buy land, housing, or shares. Foreign investment in a number of businesses – retail, travel agency, tobacco, management consultancy, accounting, etc is prohibited. Why? A Nepali can go to the US or Australia and buy what he wants or start a business of his choice. You can, even while residing in Nepal, buy a house in Melbourne, and purchase shares in Microsoft.

You might say that US and Australia are big countries and Nepal is small and foreigners would end up buying everything. You would be wrong.

Let us look at countries which are even smaller than Nepal. Singapore and Hong Kong both permit foreigners to buy land, property, and shares. Buying of property has not resulted in the locals ending up without housing. They now have better housing. All that has happened is that there has been a huge construction boom. Skyscrapers have been built to fulfill the demand for homes and offices needed by foreigners and locals alike.

All this is to be welcomed not shunned. Constant construction and the arrival of foreigners with money has resulted in higher incomes, better living standards, and increased life expectancy for locals in all countries which do not distinguish between domestic and foreign capital.

The outcome in Nepal, if it opens itself to investment, would be no different. Nepalese are going to sell their property to foreigners only if they want to. No one can force them to do so. Why should we presume that people in this country would take stupid decisions and not act correctly? We must let people decide, whether they value their land more or the money they will get by selling it.

Increase in property values because of foreign buying will increase the wealth available to the people of this country. Those who unlock their capital will do so for good reasons. Should they not have the freedom to do so? This money, which is unavailable at the moment, will increase economic activity throughout the kingdom.

For those who don’t want to sell, they will find that even they benefit. They would if they wanted get bigger loans against property whose value has now gone up because of foreign interest. It would be a win-win situation for all.

Buying of shares in local companies by foreigners would put current management on guard against possible takeovers. There is nothing better than this threat to improve efficiency of management of assets with local companies. The consequent boost to the share prices in the country would increase wealth of the Nepali equity holders. This will benefit the ordinary shareholders who have many times been beguiled by a lackluster, insincere, and inefficient management.

Open up Nepal for investment. Lay a red carpet welcome instead of a red-tape trap we have at present for investors. Employment opportunities will increase. Growth rate will go up. Nepal will gain. Immensely.

The Himalyan Times

I am…

Rakesh Wadhwa. Ever since, I was a school boy, I knew India was on the wrong path. Socialism was just not what we needed to get ahead. Government controlled our travel; government controlled our ability to buy and sell; and government controlled our freedom to move our money. My life has focused on the inherent rights people have. When I was in college, I never understood, what the governments meant by their "socialistic attitude". If people are free to buy, sell and move their capital themselves without any restrictions by state, then the welfare of people is inevitable & hence the countries they live in will become wealthy. The government has no right whatsoever, to point a finger at me or my business. I am not a revolutionary. I just want to light up my cigarette and not get nagged about it. I believe in non-interfering attitude to attain more.

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Bastiat Award

The Bastiat Award is a journalism award, given annually by the International Policy Network, London.
Bastiat Prize entries are judged on intellectual content, the persuasiveness of the language used and the type of publication in which they appear. Rakesh Wadhwa won the 3rd prize (a cash award of $1,000 and a candlestick), in 2006.

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Yes, India does possess the capacity to overtake the USA and that is precisely what will happen - not in some indeterminate future but by the year 2010. How? That is what the book is all about.

I am…

Rakesh Wadhwa. Ever since, I was a school boy, I knew India was on the wrong path. Socialism was just not what we needed to get ahead. Government controlled our travel; government controlled our ability to buy and sell; and government controlled our freedom to move our money. My life has focused on the inherent rights people have. When I was in college, I never understood, what the governments meant by their "socialistic attitude". If people are free to buy, sell and move their capital themselves without any restrictions by state, then the welfare of people is inevitable & hence the countries they live in will become wealthy.